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In the US, the reform of the program for the stabilization of dairy farmers' gross margin has been set in motion

Momagri Editorial Board

October 2, 2017

The next Farm Bill is currently under review in the United States. Among the topics being discussed is the Dairy Margin Protection Program (MPP-Dairy), a voluntary program whereby dairy farmers receive direct aid when their gross margin is too low. This program, set up during the last reform is not entirely satisfactory: the formula for calculating when aid should be set in motion is considered poorly calibrated.

The National Milk Producers Federation (NMPF), which represents the major dairy cooperatives in the United States, claims to be at the origin of the MPP-Dairy, even though they are clear on the current limits of the program, which according to them is incomplete, and to which they would like to make amendments1.

Particularly, they would like to increase the coefficients attributed to the 3 elements relative to production costs within the formula by 10% (the price of corn, soya and lucerne). They also propose using other price references, to modify the time taken into account (monthly instead of bi-monthly), and to lower the cost of access to higher levels of protection2.

Without waiting for the 2018 Farm Bill, the Senate Committee on budgetary allocation provided answers to the NMPF's requests last summer: aid calculation will be performed monthly and not bi-monthly; the commitment to pay for a higher level of margin protection will be less for the first 2.2 million litres for each farm.

In addition, the Secretary of State for Agriculture, Sonny Perdue, recently announced that he wants to make a “major correction” to this program in the next Farm Bill3. Pending the review of this, he has allowed farmers engaged in the program to leave before its term.
While the NMPF seems satisfied with the current momentum to improve this counter-cyclical aid system calculated on the index-linked gross margin, the fact remains that, faced with market volatility; the US dairy sector continues to rely on the cornerstone of the Federal Milk Marketing Orders, which ensure the sharing of equitable value-added between the production and processing sectors.